The Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2023-09 (the “Update”) to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This Update also includes certain other amendments to improve the effectiveness of income tax disclosures.
For public business entities, the Update is effective for annual periods beginning after December 15, 2024. For all others, the Update is effective for annual periods beginning after December 15, 2025. Early adoption is permitted, and the Update shall be applied on a prospective basis. Retrospective application is permitted.
Public business entities must disclose a tabular reconciliation using both percentages and amounts, broken out into specific categories with certain reconciling items at or above 5% of the expected tax further broken out by nature and/or jurisdiction.
All other entities must provide qualitatively disclosure of the nature and effect of significant reconciling items by specific categories and individual jurisdictions.
Income Taxes Paid
Both public business entities and all other entities must disclose income taxes paid (net of refunds received), broken out between federal (national), state/local and foreign. Disclose the income taxes paid (net of refunds received) to an individual jurisdiction when 5% or more of the total income taxes paid (net of refunds received).
Other Disaggregated Disclosures
Both public business entities and all other entities must provide Income (or loss) from continuing operations before income taxes, broken out between domestic and foreign, and Income tax expense (or benefit) from continuing operations, broken out between federal (national), state/local and foreign.
The Update removes disclosure requirements for all entities related to: reasonably possible significant changes in the total amount of unrecognized tax benefits within 12 months of the reporting date; and the cumulative amount of each type of temporary difference for which a deferred tax liability has not been recognized (due to the exception to recognizing deferred taxes related to subsidiaries and corporate joint ventures).
Detail of the Update can be found in the attached ASU 2023-09.